The Beginner’s Guide to Impact Investing

The Beginner’s Guide to Impact Investing

Impact investing has taken off, and it’s no wonder: while people want to watch their money grow in the market, they don’t want to stash their cash with corporations they dislike.

A recent study found that 78 percent of millennial investors have either put their money into these types of investments, or plan to in the future. That might be because, with impact investing, you can actually support causes that matter to you.

“Impact investing has the unique potential to harness the enormous power of investment capital to address many of the world’s most pressing social and environmental challenges,” said Hannah Schiff, research manager for the Global Impact Investing Network (GIIN), a nonprofit organization working to increase the scale and effectiveness of impact investing.

Before diving further into impact investing, let’s first review the umbrella term of “socially responsible investments” (SRI). SRI are investments that consider “the nature of the business the company conducts,” per Investopedia. It basically means investing with your ethics in mind, whether that’s avoiding tobacco or oil companies, or seeking out companies with a social or environmental mission.

Though the definitions of the terms surrounding SRI differ depending on who you talk to—and are often used interchangeably—at a minimum, socially responsible investing generally involves “negative screening,” or filtering out industries like tobacco, firearms, gambling, etc. Then, taking it a step further is “environmental, social, governance” (ESG) investing,which ensures companies pass a set of certain criteria, like fair treatment of employees and environmentally friendly practices.